Judge: Mark E. Windham, Case: 18STLC12069, Date: 2023-04-17 Tentative Ruling

Case Number: 18STLC12069    Hearing Date: April 17, 2023    Dept: 26

[NOTE: ON APRIL 11, 2023, THE PARTIES FILED A STIPULATION TO RESCHEDULE THE MSJs, CONTINUE THE TRIAL DATE, AND EXTEND THE 5-YEAR DEADLINE.]

PROCEEDINGS:     MOTION FOR LEAVE TO FILE SECOND AMENDED COMPLAINT

MOVING PARTY:   Plaintiffs Joel Bander and Felicia Bander

RESP. PARTY:         Defendants and Cross-Complainants Ronald Bills, Howard Management Group, Daniel Sloan, Gonzalo Olmedo d/b/a Olmedo’s Construction, Business Alliance Insurance Company, and W.I.R. Holdings LLC

MOTION FOR LEAVE TO FILE AMENDED COMPLAINT

(CCP §§ 473(a), 576; CRC Rule 3.1324)

SERVICE:

[X] Proof of Service Timely Filed (CRC 3.1300) OK

[X] Correct Address (CCP 1013, 1013a) OK

[X] 16/21 Day Lapse (CCP 1005 and 1013) OK

SUMMARY OF COMPLAINT: Action for return of security deposit and related claims. Cross-action for breach of lease agreement and negligent and intentional property damage.  

GROUNDS FOR MOTION: Grant Plaintiffs leave to amend the first amended complaint to add causes of action for constructive fraud, conversion, aiding and abetting constructive fraud and conversion, and violation of the Consumer Law Remedies Act. Since the prior motion for leave to amend was denied there have been many new developments from extensive discovery. Only three of the four proposed causes of action were addressed in the first motion for leave to amend. New evidence regarding these causes of action came to light after Defendants’ depositions in July 2022. The only duplicate cause of action from the first motion for leave amend is for violation of the CLRA. Reconsideration should be given to the Court’s ruling on the CLRA cause of action based on new case law raised in the order and which Plaintiffs previously had no opportunity to address.

OPPOSITION:  Plaintiffs made the same motion for leave to amend twice previously. The first motion was taken off calendar after Defendants filed their opposition. The second motion was denied by Judge Liu in an exhaustive ruling dated July 13, 2022. No facts have changed since this action was filed in September 2018 and no discovery has been obtained to justify amendment. Plaintiffs are attempting to create triable issues of material fact regarding the pending motions for summary judgment by amending the pleading, which is not proper. The motion for leave also fails to comply with CRC Rule 3.1324 and misrepresents Sloan’s deposition testimony. Plaintiffs, including Joel Bander who is a vexatious litigant, are simply trying to increase defense costs.

REPLY:  The opposition was filed and served late and should be disregarded. Defendant repeatedly violated Civil Code section 1950.5 and their motions for summary judgment do not even address that cause of action. The opposition does not explain why the Motion fails to comply with CRC Rule 3.1324, provide any evidence that Plaintiff Joel Bander is a vexatious litigant, or show that they will be prejudiced by the amendment.

TENTATIVE RULING:

Plaintiffs Joel Bander and Felicia Bander’s Motion for Leave to File a Second Amended Complaint is DENIED.

ANALYSIS:

Plaintiffs Joel Bander and Felicia Bander (“Plaintiffs”) filed the instant action for failure to return their security deposit and related claims against Defendants Ronald Bills (“Defendant Bills”), Howard Management Group (“Defendant HMG”), Daniel Sloan (“Defendant Sloan”), Gonzalo Olmedo dba Olmedo’s Construction (“Defendant Olmedo”) and Business Alliance Insurance Company (“Defendant BAIC”) on September 24, 2018. The case was initially assigned to the limited jurisdiction court, then reassigned to an independent calendar court. (Notice of Reassignment, 09/24/19.) The first amended complaint was filed on October 22, 2019.

Defendant WIR Holdings, LLC (“Defendant WIR”), added as a doe defendant, filed a cross-complaint against Plaintiffs on October 14, 2020. On July 13, 2022, the judge in the unlimited jurisdiction court denied Plaintiffs’ motion for leave to amend the first amended complaint. (Minute Order, 07/13/22.)

Defendants filed motions for summary judgment on November 29, 2022, which are set for hearing on April 19-May 8, 2023. On December 21, 2022, the Court found that exceptional circumstances exist in this action, which warrant appointment of a discovery referee. (Minute Order, 12/21/22.) The discovery referee was appointed on January 17, 2023. (Minute Order, 01/17/23.) Although no motion for leave to amend was filed, Plaintiffs had reserved January 17, 2023 for a hearing on such a motion. The hearing was continued to April 4, 2023 and the instant amended motion for leave to amend was filed on March 8, 2023. Defendants filed an opposition on March 27, 2023 and Plaintiffs replied on March 29, 2023.

Discussion

Code of Civil Procedure section 473, provides that “[t]he court may, in furtherance of justice and on any terms as may be proper, allow a party to amend any pleading…” (Code Civ. Proc., § 473, subd. (a)(1).) “Any judge, at any time before or after commencement of trial, in the furtherance of justice, and upon such terms as may be proper, may allow the amendment of any pleading or pretrial order.” (Code Civ. Proc., § 576.) 

The policy favoring amendments and resolving all matters in the same dispute is “so strong that it is a rare case in which denial of leave to amend can be justified. [Citation.]” (Howard v. County of San Diego (2010) 184 Cal.App.4th 1422, 1428.) “Although courts are bound to apply a policy of great liberality in permitting amendments to the complaint at any stage of the proceedings, up to and including trial [citations], this policy should be applied only ‘where no prejudice is shown to the adverse party . . . . [citation].  A different result is indicated ‘where inexcusable delay and probable prejudice to the opposing party’ is shown. [Citation].” (Magpali v. Farmers Group (1996) 48 Cal.App.4th 471, 487.) Where a proposed amendment opens an entirely new substantive area of injury on the eve of trial without any explanation for why the major change had not been made long before, denial of leave is appropriately ordered in the court’s discretion.  (Id.)

A motion for leave to amend a pleading must also comply with the procedural requirements of California Rules of Court, Rule 3.1324, which requires a supporting declaration to set forth explicitly what allegations are to be added and where, and explicitly stating what new evidence was discovered warranting the amendment and why the amendment was not made earlier. The motion must also include (1) a copy of the proposed and numbered amendment, (2) specifications by reference to pages and lines the allegations that would be deleted and added, and (3) a declaration specifying the effect, necessity and propriety of the amendments, date of discovery and reasons for delay. (Cal. Rules of Court, Rule 3.1324, subds. (a), (b).)

State of the Current Pleadings

The operative complaint is the first amended complaint filed on October 22, 2019. The first amended complaint initially alleged causes of action for (1) return of security deposit held in bad faith [Civil Code § 1950, et seq.]; (2) imposition of constructive trust; (3) interference with business relations; (4) civil conspiracy; (5) unfair business practices; and (6) action on bond [Code of Civil Procedure §§ 996.410, 7071.5, 7071.6]. On July 13, 2022, Judge Liu in the unlimited jurisdiction court struck the second, third and fourth causes of action without leave to amend. (Minute Order, 07/13/22, p. 2.) Judge Liu also struck the requests for all relief in connection with the fifth cause of cause of action, leaving only the first and sixth causes of action viable. (Ibid.) Finally, the Court denied Plaintiffs’ request to add causes of action for fraud and violation of the Consumer Legal Remedies Act (“CLRA”). (Ibid.)

Also, Defendant WIR’s cross-complaint alleges that Plaintiffs breached their lease agreement by damaging the concrete driveway of the premises (“the Premises”) in an amount greater than covered by their security deposit.

Request for Leave to Amend and Compliance with Cal. Rules of Court Rule 3.1324

Plaintiffs now seek leave to amend the first amended complaint to add causes of action for constructive fraud, conversion, conspiracy to aid and abet constructive fraud and conversion, and violation of the CLRA. Plaintiffs’ declaration in support of the amended motion for leave to amend substantively complies with the mandatory requirements of Rule 3.1324. The declaration sets forth the proposed amendments at pp. 20:9-30:16, the effect of the amendments at pp. 30:17-31:17, why the amendments are necessary at p. 31:18-28, and when facts giving rise to the amendments were discovered at pp. 32:1-33:22. (Amended Motion, J. Bander Decl.)

a.       1st Cause of Action for Return of Security Deposit Held in Bad Faith

Plaintiffs move to add Defendant WIR Holdings to this cause of action, while removing Defendants Howard and Sloan, adding factual allegations regarding the calculation of the repairs to the driveway, and adding more statutory violations related to the security deposit. Plaintiffs admit that the facts underlying these amendments were raised in the prior motion for leave to amend. (Motion, J. Bander Decl., ¶48.) However, the first motion for leave to amend did not propose these changes and Plaintiffs do not explain why the changes should be permitted now when the underlying facts had been known for a year or more. To the extent the unlimited jurisdiction court judge did not rule on Plaintiffs’ request to add a violation of Los Angeles Municipal Code section 151.06.02 (failure to pay Plaintiffs monthly interest on the security deposit), they were not diligent in raising this omission with the Court. (Id. at ¶39.)

The Court further notes that the new factual allegations Plaintiffs seek to add at paragraph 15 are merely to supplement the theory of liability already set forth in the first amended complaint, namely that the volume of cement Defendants claimed was necessary for the repairs was impossible. (See id. at ¶38.) The addition of the proposed evidentiary facts to paragraph 15 is unnecessary based on California’s pleading standard, which only requires the allegation of ultimate facts. (See C. W. Johnson & Sons, Inc. v. Carpenter (2020) 53 Cal.App.5th 165, 169.)

b.      2nd Cause of Action for Constructive Fraud

Plaintiffs move to add a cause of action for constructive fraud against Defendants Bills and WIR Holdings. This new cause of action is purportedly based on deposition testimony Plaintiffs obtained from Defendants Sloan and Bills in July 2022. Plaintiffs argue that the instant motion was brought as soon as possible in light of the time needed to allow Defendants to make corrections to the deposition transcripts. Specifically, the transcripts were prepared by August 8, 2022, after which Defendants had 30 days to make corrections. (Motion, J. Bander Decl., ¶¶42, 52-56.) When Plaintiffs reserved the motion for leave to amend, the earliest hearing date was January 17, 2023. (Motion, J. Bander Decl., ¶58.) Plaintiffs, however, did not file the motion for that hearing date and requested on December 21, 2022 that the hearing be continued to April 2023. (Registrar of Actions, 12/21/22.) Plaintiffs contend that they continued the hearing on this motion in light of the Court’s ruling sending the discovery motions to a referee. (Id. at ¶58.) This continuance was not reasonable given Plaintiffs’ argument that the proposed amendments are supported by the deposition testimony from July 2022. The pending discovery motions should have no bearing on the instant motion for leave to amend, which could have been filed before Defendants’ motions for summary judgment were filed, or at least heard in January 2023, long before the hearings on the motions for summary judgment. Therefore, the Court finds that Plaintiffs unreasonably delayed in seeking leave to add this cause of action.

Also, the Court may deny leave to amend if the proposed amendment does not state a cause of action.

“Constructive fraud ‘arises on a breach of duty by one in a confidential or fiduciary relationship to another which induces justifiable reliance by the latter to his prejudice.’ [Citation.] Actual reliance and causation of injury must be shown. [Citation.]” (Tyler v. Children's Home Society (1994) 29 Cal.App.4th 511, 548.) As with other species of fraud, it must be alleged with particularity. (Knox v. Dean (2012) 205 Cal.App.4th 417, 434.)

The proposed cause of action for constructive fraud is based on information Plaintiffs obtained from Defendants’ depositions from July 2022. Plaintiffs argue that Defendant Sloan testified Defendant Bills had made the decision to hold the entire security deposit in April 2018, months before Defendant Olmedo provided the repair estimate. (Amended Motion, J. Bander Decl., ¶¶42, 53-54.) The deposition testimony, however, does not support this interpretation. Defendant Sloan testified that Defendant Bills “had knowledge that there was some damages to the concrete” and “advised me that we were going to be holding the security deposit funds against those damages.” (Id. at Exh. G, pp. 14:2-8, 16:3-18.) This testimony does not indicate how much of the deposit was to be held against the amount to repair the concrete. The motion inaccurately contends that this testimony shows a pre-determined intent to keep the entire security deposit in breach of a duty owed to Plaintiffs by Defendants.

Second, Plaintiffs contend that a cause of action for constructive fraud is proper based on the existence of a confidential relationship. The elements of a confidential relationship are “ ‘1) The vulnerability of one party to the other which 2) results in the empowerment of the stronger party by the weaker which 3) empowerment has been solicited or accepted by the stronger party and 4) prevents the weaker party from effectively protecting itself.’ ” (Persson v. Smart Inventions, Inc. (2005) 125 Cal.App.4th 1141, 1161 [citing Richelle L. v. Roman Catholic Archbishop (2003) 106 Cal.App.4th 257, 272].) Stated another way, “a confidential relationship exists when one party gains the confidence of the other and purports to act or advise with the other’s interest in mind.” (Younan v. Equifax Inc. (1980) 111 Cal.App.3d 498, 517, n. 15 [citing Kudokas v. Balkus (1972) 26 Cal.App.3d 744, 750].) The amended motion does not explain how the parties’ landlord-tenant relationship meets the definition of a confidential relationship based on an imbalanced relationship, as opposed to an arms’-length relationship. (See Amended Motion, p. 16:1-3.) Nor does the proposed second amended complaint allege facts that would support such a confidential relationship solicited by Defendants; it merely alleges a standard landlord-tenant relationship. (Id. at pp. 6:19-7:10.)

c.       3rd Cause of Action for Conversion

The cause of action for conversion is based on facts that support the first cause of action for bad faith withholding of the security deposit. As discussed above, Plaintiff has unreasonably delayed in seeking to add this cause of action.

d.      4th Cause of action for Civil Conspiracy to Aid and Abet Constructive Fraud and Conversion

This is a derivative cause of action that relies on the proposed second and third causes of action. Amendment is only proper if those causes of action are added.

e.       5th Cause of Action for Violation of the Consumer Legal Remedies Act

This cause of action was proposed with Plaintiffs’ first motion for leave to amend and denied by the Court on July 13, 2022. (Minute Order, 07/13/22.) Plaintiffs now contend that reconsideration of the denial is proper because the Court relied on previously undiscussed case law in its ruling, without Plaintiffs having an opportunity to respond. The amended motion for leave cites to Monarch Healthcare v. Superior Ct. (2000) 78 Cal. App. 4th 1282 for the proposition that:

[F]undamental principles of due process also call for those with an interest in the matter to have notice and the opportunity to be heard, so that the ensuing order does not issue like a "bolt from the blue out of the trial judge's chambers." (Campisi v. Superior Court (1993) 17 Cal.App.4th 1833, 1839, 22 Cal.Rptr.2d 335; see Tokio Marine & Fire Ins. Corp. v. Western Pacific Roofing Co. (1999) 75 Cal.App.4th 110, 121, 89 Cal.Rptr.2d 1 [" 'Notice and a chance to be heard are essential components to the trial court's jurisdiction and for due process.' "].) Monarch should have been given the opportunity to brief the new issue raised by the trial court at the hearing. (Alvak Enterprises v. Phillips (1959) 167 Cal.App.2d 69,334 P.2d 148 [affidavit filed with court after submission, without notice to opposing party, cannot be considered in support of motion];

(Monarch Healthcare v. Superior Ct. (2000) 78 Cal. App. 4th 1282, 1286.) In Monarch, the party moving for reconsideration was deemed to have waived improper notice of the issue by failing to “seek a continuance or permission to file a supplemental brief” or by filing a motion for reconsideration. (Monarch Healthcare v. Superior Court (2000) 78 Cal.App.4th 1282, 1286.) The Court finds that Plaintiffs likewise waived improper notice of the July 13, 2022 order by failing to seek leave to file a supplemental brief at that time and by waiting eight months to bring this request for reconsideration.

Inexcusable Delay and Prejudice to Defendants

Regardless of Plaintiffs’ contention that this amended motion was delayed because of the pending discovery motions, nothing indicates that the proposed amendments will rely on information obtained as a result of those motions. The instant motion for leave to amend relies on facts previously known to Plaintiffs or discovered in the July 2022 depositions. It could have been filed months earlier, and before the motions for summary judgment, in the fall of 2022. Therefore, the Court finds Plaintiffs have inexcusably delayed in seeking leave to add new theories of liability based on facts available to the parties for a year or more and many of which were already presented in the first motion for leave to amend. Plaintiffs also inexcusably delayed in addressing the perceived failure to the July 13, 2022 ruling regarding the first motion for leave to amend. As a result, the instant amended motion is brought so late in the litigation—four and a half years after commencement of the action and three months after Defendants filed motions for summary judgment—that prejudice from forcing Defendants to respond to the second amended complaint and re-file the motions for summary judgment, is inevitable.

The Court notes that the parties have just now filed a stipulation for scheduling the outstanding issues in this action, including continuing the trial date, hearings on the motions for summary judgment, and extending the five-year deadline under Code of Civil Procedure section 583.340, all of which would be upended if leave to amend were granted at this late hour.

Conclusion

Therefore, Plaintiffs Joel Bander and Felicia Bander’s Motion for Leave to File a Second Amended Complaint is DENIED.

Defendants to give notice.